Ladies and gentlemen, thank you for standing by and welcome to the Fox Corporation First Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the -- like to turn the conference over to our Chief Investor Relations Officer and Executive Vice President of Corporate Initiatives, Mr. Joe Dorrego. Please go ahead sir.

Thank you, operator. Hello, everyone and welcome to our first quarter fiscal 2020 earnings conference call. Joining me on the call today are Lachlan Murdoch, Executive Chairman and CEO; John Nallen, COO and Steve Tomsic, our CFO. First, Lachlan and Steve will give some prepared remarks on the most recent quarter and then we’ll take questions from the investment community. Please note that this call may include forward-looking statements regarding Fox Corporation's financial performance and operating results. These statements are based on management’s current expectations and actual results could differ from what is stated as a result of certain factors identified on today’s call and the company’s SEC filings. Additionally, this call will include certain non-GAAP financial measures, including adjusted EBITDA or EBITDA as we refer to it on this call. Reconciliations of non-GAAP financial measures are included in our earnings release and our SEC filings which are available in the Investor Relations section of our website. And with that, I’m pleased to turn it over to Lachlan.

Thanks, Joe. Good afternoon, and thanks everyone for joining us today on Fox Corporation's 2020 first quarter earnings call. Our first full fiscal year as a standalone public company is off to a solid start with good positive momentum across all our businesses. We've just reported strong financial results, which Steve will comment further on shortly. But perhaps more importantly, we are making significant progress on the operational goals and strategic initiatives that we outlined to you at our Investor Day. Our strategy to build Fox around live sports, news and event programming is producing results and delivering audience growth and engagement faster than we expected. For example, we are now six weeks into the fall season and Fox's establish itself as both the number one rated broadcast network and the only Big 4 network to deliver year-on-year audience growth in the key 18 to 49 demographic and in total viewers. We're up 5% in 1,849 ratings and 10% in total viewers. This leadership position stems from the investments we're making across our network beginning with Fox Sports, which is accounted for 22 of the 50 most-watched telecast in the country since the NFL kickoff. Our ratings are up 11% across our entire portfolio of college and pro football led by Thursday Night with viewership up 22% and our Sunday broadcast which is up 8% to a 3-year high. Another new addition to the Fox Network was the debut of WWE's Friday Night SmackDown on October 4 to an average audience of nearly 4 million viewers. We are thrilled with our WWE partnership as it completes our strategy, the program live content from Thursday through Sunday in the fall. The momentum behind football and WWE continued into the second quarter with a solid major-league baseball postseason, culminating with a historic…

Thanks, Lachlan, good afternoon. We’ve made a solid start to fiscal 2020. And notwithstanding the subscriber headwinds Lachlan just mentioned, overall we are exceeding our internal plans that we commenced the year with. We delivered healthy top line and double-digit EBITDA growth in the first quarter, which sets us up well for the remainder of fiscal 2020. Let me now take you through our results and along the way remind you of some key factors that shaped the rest of that fiscal year. In the first quarter, the company reported a total revenues of $2.7 billion, up 5% over the comparative. In fiscal 2019, reflecting revenue growth across all operating segments. EBITDA was $856 million, a 12% increase over the $761 million generated in the prior year, led by high contributions from the television and cable segment. This growth was partially offset by higher corporate expenses reported in the other segment, which reflect the cost of Fox operating as a standalone public company in the current year quarter. This is the presentation of carve-out financial statements in the prior year, From the bottom line perspective, net income attributable to stockholders of $499 million or $0.80 per share was lower than the $604 million or $0.97 per share in the prior year quarter. This decrease was primarily attributable to $115 million reduction in the unrealized gain recognized in other net related to the changing fair value of the company's investment in Roku. Excluding this impact and other one-time items, adjusted EPS of $0.83 was up slightly over last year's $0.82 per share as a strong operating performance was largely offset by below the line item such as interest and tax expense which as we’ve flagged in the past, now reflect the full amount associated with operating as a standalone company. So…

Thanks, Joe. Operator, we would be happy to take questions from the investment community.

Thank you, sir. [Operator Instructions] And we will go to the line of Doug Mitchelson with Credit Suisse.

Thanks so much. One question. I guess for Lachlan and John, I’m just curious for an update on the progress on investment spending, how much -- was the September core of a proportion to the year in terms of the investment spending that you laid out at the Analysts Day and how are each of those investments doing Lachlan or you already touched on WWE, but in terms of the program investment and in terms of Fox Nation would love to get an update. Thank you.

Hey, Doug, I will let Steve tackle on.

Doug, listen in terms of the amount of investment spending actually deployed in the quarter is actually relatively modest. We called out at the Investor Day, somewhere between $200 million and $250 million of net EBITDA investment over the court to that year. And I would say, less than 10% of that was deployed over the quarter you will see a significant amount of that come through in the quarter we are in now. Because we obviously got WWE that launched on October 4. We are now right in the middle of the full schedule and entertainment programming in Fox Nation, we continue to build in terms of the programming in the marketing.

We can go to the next question, please.

And we will go to the line of Jessica Reese Erlich with Bank of America. Please go ahead.

Thank you. One question, it's a tough one. So maybe a multipart. Can you give us color on -- we saw the advertising numbers for this quarter. But as you look out to the second quarter and the third quarter with Super Bowl. I mean, given your rating in the upfront can you just give us some color on what’s going on and you have a new advertising structure, which seems to be working well. And then anything you can say on -- any movement and discussions on the NFL negotiations would be great. Any color there?

Great, Jessica. Those aren't tough questions. So I'm happy to take them. So thank you. Look, from an advertising point of view talk a little bit about Super Bowl in a second, but in the quarter, despite some of the comparison that Steve mentioned in his earlier comments, advertising has been quite strong, particularly across the entertainment and sports categories. We had a very successful upfront with entertainment pricing up double digits. And with sports pricing up high single digits, which we be very pleased to achieve. In addition, that one of the critical goals of our upfront was also to set the WWE pricing to broadcast pricing, not cable pricing and we did that very successfully. Categories in the market are -- a number of categories are incredibly strong. The streaming services with Disney, Netflix and Apple are recently being spending good money. The tech sector, Google, Microsoft, Amazon, very strong clients. Pharmaceutical has been strong, they have been moving some of the money between demographics. So from -- some money out of news, but on to -- on the sports and entertainment. And of course the financial services sector. Clients like GEICO, Progressive, State Farm have also been -- being spending good money and supporting us very well. So we are happy with where we’re haven’t mentioned news. News, pricing and the upfront was up mid single-digits. The news market as advertising market is softer, then in entertainment and in sport, we think that’s because of some of the ratings deficiencies at our competitors that are some volume has been given away more cheaply than we would agree to. So we were finding the news market softer than sports and news. Pacing in the -- sorry in the quarter, our scatter pricing was up about 25%. There's very little scatter, so it's a good statistic. And going forward, it is lower than that, but still up -- well above the upfront, which leads us to the Super Bowl. We are well ahead of last year's or so -- we -- obviously we don’t know last year as our competitor, but we’re well ahead of our last Super Bowl, where we were selling at this stage in the year. We're sold out of all of our A positions, and we’ve really good momentum as we continue to sell the Super Bowl. So we are very confident that the pricing will be -- I don’t want to give the number, but they're quite the pricing will certainly be the highest cost per 30 second ad in a Super Bowl to date. So we are very pleased with that. On the NFL, we don't have an update for you terms of where we are with negotiations. Obviously, we're engaged with the NFL everyday as we broadcast their fixtures. And -- but negotiations with the NFL in terms of a renewal of any of the packages has not started yet.

And next we will go to the line of Michael Nathanson with MoffettNathanson. Please go ahead.

Thanks. I’m going to ask a couple around Nexstar. So you talk a bit about the accretion math behind the station swap? And do you move to Fox's retrans rate card right away? And is that higher than Nexstar's rate card? And then lastly, beside from rate retrains step ups, if there are any. are there any benefits you derive from getting in those markets. You called out the geographic footprint, but I want to know like what is that drive? What is that benefit you from changing the location of these markets?

Hey, Michael, it's Steve here. In terms of the retrans benefit, it pretty much is a straight move from taking what they were paying us from those stations from a programming fee perspective and then assuming them into our retrans rates. That's a pretty immediate impact and synergy benefit of taking the station on to their balance sheet. So adversely hits our P&L from day one. Remember though, this won't close until later in the fiscal year. So you probably won't see much of that in fiscal '20.

And Michael, its John. Adding those key markets which were pretty well missed, the only one who's missing when you look at our footprint, particularly for the NFL and the other sports we are in, is just a big revenue upside for us. It helps on both national and a local level. And we achieved cost synergies to given the size of the station group that we have, we just would naturally achieve some cost synergies there.

We can go to the next question.

Yes, sir. Next we will go to the line of Ben Swinburne with Morgan Stanley.

Thank you. Good afternoon. Just on the buyback and sort of the balance sheet, you guys talked about a $1.5 billion minimum cash balance at the Investor Day. As you noted, you guys are over 3. And I think even after the ASR, the acquisitions you've announced the dividend you’re still not even spending your free cash flow this year at least up on our numbers. So I’m just wondering if you have any timeline in mind or sense of urgency about optimizing the balance sheet from a cash debt perspective? It's a not sort of way of me trying to figure out how fast you’re going to buyback your stock obviously. So …

[Indiscernible]. But look the buyback is just one element of our overall discipline balanced allocation of our capital. So today we're pleased to announce that authorization and the deployment of the $500 million and I'd remind you that this announcement is right in line with the timetable that we had established. It's been well developed by our Board, established in the best interest of all our shareholders and with its adoption ongoing authorizations will be determined as an ordinary course matter with the Board. Now to deal with your question, specifically, while we fully expect to complete the authorization, we won't follow a formulaic approach to any current or future buyback deployment. It just doesn't make any sense to us. So we will invest our capital where we feel we can generate the greatest long-term return and our investment for our shareholders and amongst the various legs of disciplined and balanced capital allocation.

I think we can go to the next question.

And we will go to the line of Rich Greenfield with LightShed.

Hey, guys. It's Brandon Ross. Its Brandon.

Welcome back.

Thank you. First on FS1. So Disney took UFC from you guys and recently took Bundesliga, and I'm pretty sure they renewed with Formula One. So just -- can you help us with how you plan to fill the programming hole there? And then thinking about the Super 6 mobile game that you guys launched, which looks like an on-ramp to legalized betting for you guys. Can you give us any takeaways that you've learned so far there? Thanks.

So let me just start with Fox Sports One. I would -- politely respectfully disagree with you in terms of sort of any of kind of programming hole. The Fox Sports One programming lineup is pretty impressive. Huge amount of college sports, huge amount of NASCAR, for instance primary home of our NASCAR programming boxing. And so we're very pleased with the programming on Fox Sports One. We will obviously look at continuing to strengthen that as opportunities that are fit with our program strategy emerge. So we are pleased with where Fox Sports One sits today. And I think our distributors are, if you look at the renewals across all of our affiliate renewals, I mean, on Fox Sports One continues to drive increases in affiliate fees and rate. So our affiliates agree with us. And sorry which was the question on ...?

On Super 6.

On Super 6.

Yes.

So, yes, Super 6 has been incredibly successful. If you look at the strategy of any of these Fox spend, if you look at what the strategy was in Sky in Britain and other countries where legalized sports, digital sports wagering has occurred. Having a free to play game at sort of the top of the phone to attract users is critically important, having with Super 6 and the success the very early and rapid success of Super 6, I think bodes very well to dropping from those users down into Fox Bet for pay game. So we are pleased with Super 6 and we are pleased with Fox Bet. I should mention and I didn’t -- I was remiss not to mention this to in response to Jessica's question, already if you look just in the New York, New Jersey market really for the New Jersey sports betting there are already 13 active gaming advertisers. And so, one of the reasons we were quite pleased about this liberalization of sports wagering rules state-by-state is not only do we think we will gain tremendous long-term value through Fox Bet, but also just from an advertising point of view, we are now seeing several million dollars year-to-date already start to flow through in only the very limited number of states where sports wagering is legalized.

Operator, we have time for one more question.

Okay. And that will be from the line of Jon Hollick with UBS. Please go ahead.

Okay. Thanks, guys. Maybe on the affiliate side, I guess, did 4.3% growth this quarter. I think in the last you guys said 7 percentage sort of in the mix. Obviously a lot of moving parts. Maybe talk about -- a little bit about the renewals you guys have talked about when that you should see that hit -- impact the P&L? And yes, that 7% still a good guide for the year? Thanks.

Hey, Jon, it's Steve. I think -- that’s around the mark. You should see the pattern here and it's a similar pattern to what we saw last year, which is September quarter and December quarter pretty flat for us, and you should see -- so you should expect December this year to be a similar kind of performance for us. But then with renegotiations that we’ve just done, which Lachlan outlined in his opening remarks, the right resets that we get out of those renegotiations really begin to kick in at the start of the calendar next year. So when you look at the first half, second half growth rate, the growth rate will absolutely be skewed to that that second half and in particular at third quarter, where you will see the benefit of those rate resets really kicking. Again, it will be skewed towards retransmission growth as against cable affiliate. But we feel pretty comfortable where we are after the full-year and also that $2.65 billion target for calendar '22.

At this point we are out of time. Thank you everybody for joining today's call. If you have any further questions, please give Dan Carey or me a call. Speak -- talk to you next quarter.

And ladies and gentlemen, that does conclude our conference call for today. Again, thank you very much for your participation and for using the AT&T Executive Teleconference. You may now disconnect.